LONDON: Royal Bank of Scotland beat first-half profit forecasts on Friday in a sign its long-promised recovery is finally gathering pace, and said it may move up to around 150 jobs to Amsterdam after Brexit.
The state-controlled bank’s shares rose as much as 5 percent after it reported an unexpected 44 percent jump in income at NatWest Markets, the rebranded investment banking unit that brought it to the brink of collapse during the financial crisis.
RBS, rescued in a record £45.5 billion ($59.8 billion) bailout at the height of that crisis, has not made an annual profit since 2007 and last made a first-half profit in 2014.
“We are doing what we said we would, growing income, reducing costs and improving returns,” Chief Executive Ross McEwan told reporters on a conference call.
RBS also said it was in talks with the Dutch central bank to use a license it has in the Netherlands to conduct some Natwest Markets business there if it becomes necessary following Britain’s exit from the EU.
The unit currently has just a handful of staff but plans to employ a total of around 150, McEwan said.
In common with British-based rivals such as Barclays and HSBC, RBS has undergone a multi-year program of restructuring including shedding billions of pounds worth of assets worldwide since the 2008 financial crisis.
The bank said it made £939 million in pretax profit in the six months to the end of June, higher than the £872 million average estimate of four analysts surveyed by Reuters.
Its core capital ratio, a key measure of financial strength, also rose to a better than expected 14.8 percent.
RBS said new accounting standards known as IFRS 9 due to be implemented in January would have boosted that ratio by a further 0.3 percentage points if included now, one of the first indications by a bank of the impact of the new rules.
While the bulk of its restructuring is now done, RBS is behind its rivals in returning to profitability and faces a host of outstanding legal challenges that could hinder the resumption of dividends, a key sign of rehabilitation for investors.
The bank took an additional £396 million in charges in the first half of the year for resolving past misconduct.
The biggest of RBS’s legal problems remains an outstanding investigation by the US Department of Justice (DoJ) into alleged mis-selling of mortgage backed securities during the build up to the 2008 crisis.
The settlement is key to the bank resuming dividend payments, and to the British government selling its 71 percent stake in RBS.
McEwan said he was optimistic about settling the case in the second half of this year, and that expectation was one of the reasons the bank was not forecasting a profit for 2017 as a whole, as it anticipates a hefty bill.
RBS last month agreed to pay £5.5 billion to settle a similar case with the US Federal Housing Finance Agency, but analysts expect the DoJ case to cost the bank billions more.
McEwan, however, later cast doubt on the timing of the settlement, when asked by Reuters on a conference call whether negotiations had started with the DoJ.
“There is a chance we may not get it done this year , but that depends on when those conversations start,” he said.
Unlike rivals Lloyds and Barclays, RBS did not increase its provision for claims of mis-selling payment protection insurance, Britain’s costliest consumer finance scandal.
RBS makes first-half profit, may move some jobs to Amsterdam
RBS makes first-half profit, may move some jobs to Amsterdam
Global brands shut Middle East stores as conflict causes chaos
- Luxury brands and retailers close stores in Middle East
- Conflict threatens the region that has been luxury’s fastest growing
- Mass-market retailers monitor situation, adjust operations in region
PARIS: In Dubai and other major Middle Eastern shopping hubs, many stores are closed or operating with a skeleton staff as the escalating conflict in the region causes chaos for businesses and travel.
The US-Israeli air war against Iran expanded on Monday with no end in sight, with Tehran firing missiles and drones at Gulf states as it retaliates for a weekend of bombing that killed Iran’s supreme leader and reportedly killed scores of Iranian civilians, including a strike on a girls’ primary school.
Chalhoub Group, which runs 900 stores for brands from Versace and Jimmy Choo to Sephora across the region, said its stores in Bahrain were closed, while other markets, including the UAE, Saudi Arabia, and Jordan remained open though staff attendance was “voluntary.”
“We operate with a lean team formed of members who volunteered and feel comfortable to come to the store,” Chalhoub’s Vice President of Communications Lynn al Khatib told Reuters, adding that the company’s leadership team personally visited Dubai Mall and Mall of the Emirates on Monday morning to check in with workers.
E-commerce giant Amazon closed its fulfillment center operations in Abu Dhabi, suspended deliveries across the region and instructed its employees in Saudi Arabia and Jordan to remain indoors, Business Insider reported on Monday, citing an internal memo.
Gucci-owner Kering said its stores were temporarily closed in the UAE, Kuwait, Bahrain and Qatar and it has suspended travel to the Middle East.
Luxury growth engine under threat
Shares in luxury groups LVMH, Hermes, and Cartier-owner Richemont were down 4 percent to 5.7 percent on Monday afternoon as investors digested the knock-on impacts of the conflict.
The Middle East still accounts for a small share of global spending on luxury — between 5 percent and 10 percent, according to RBC analyst Piral Dadhania. But the region was “luxury’s brightest performer” last year, according to consultancy Bain, while sales of expensive handbags have stalled in the rest of the world.
Now, shuttered airports have put an abrupt stop to tourism flows into the region and missile strikes — including one that damaged Dubai’s five-star Fairmont Palm hotel — are likely to dissuade travelers, particularly if the conflict drags on.
“If you assume that it’s a $5 billion to $6 billion (travel retail) market and let’s say it’s going to be shut down for a month, we are talking about hundreds of millions of dollars that are definitely at risk,” said Victor Dijon, senior partner at consultancy Kearney.
If Middle Eastern shoppers cannot travel to Paris or Milan, that could also hurt luxury sales in Europe, he added.
Luxury brands have been investing in lavish new stores and exclusive events across the region. Cartier unveiled a “high-jewelry” exhibition in Dubai’s Keturah Park just days before the conflict started.
Cartier and Richemont did not reply to requests for comment.
Luxury conglomerate LVMH has also bet big on the region. Last month, its flagship brand Louis Vuitton staged an exhibition at the Jumeirah Marsa Al Arab hotel, and beauty retailer Sephora launched its first Saudi beauty brand.
LVMH does not report specific figures for the region, but in January Chief Financial Officer Cecile Cabanis said the Middle East has been “displaying significant growth.” LVMH did not reply to a request for comment on how its business may be impacted by the conflict.
The Middle East has also attracted new investment from mass-market players. Budget fashion retailer Primark said in January that it plans to open three stores in Dubai in March, April and May, followed by stores in Bahrain and Qatar by the end of the year.
“Primark is set to open its first store in Dubai at the end of March but clearly this is a fast-moving situation which we are monitoring closely,” a spokesperson for Primark-owner Associated British Foods said.
Apple stores in Dubai will remain closed until Thursday morning, the company’s website showed, while Swedish fast-fashion retailer H&M said its stores in Bahrain and Israel are closed.
Consumer goods group Reckitt has told all employees in the Middle East to work from home, temporarily closed its Bahrain manufacturing site and suspended all business travel to the region until further notice.
